NEW YORK (CNN/Money) -
Hurricane Katrina could cost the U.S. over 400,000 jobs and shave up to 1 percent off the nation's economic growth in the second half of the year, the Congressional Budget Office said.

The CBO said much of the loss will come from disruption of oil production. It added that the economy, growing at a projected rate of 3.7 percent in 2005, had been growing steadily at the time of the storm.

"The devastation in the Gulf Coast region is unlikely to knock the economy far from that course," the CBO said in a letter to Senate Majority Leader Bill Frist, dated Wednesday. "While making specific estimates is fraught with uncertainty, evidence to date suggests that overall economic effects will be significant but not overwhelming."

The estimate from the CBO, the non-partisan budget arm of Congress, comes as economists and policy-makers wrestle with the economic impact of the storm.

Hurricane Katrina slammed into the Gulf Coast last week, killing hundreds or perhaps thousands of people in Louisiana and Mississippi and flooding New Orleans. The storm also knocked out infrastructure in the region from bridges and power lines to buildings and oil rigs.

The CBO said the impact of Katrina is likely to be more far-reaching than that of past hurricanes because of the oil industry along the Gulf Coast, which is responsible for about a quarter of domestic oil production and contains the country's only deep-water port for oil imports.

But the CBO said refineries and pipelines were coming back online faster than expected and that should help avert a severe energy shortage.

While many industries in the area suffer in the storm's wake, the CBO said some businesses will see a boom from clearing and reconstruction efforts, although those efforts may be a bit slower to start compared to the clean-up following previous storms.

The CBO said the impact on the federal budget is unclear, but noted that the president has already authorized the spending of $10.5 billion in aid money and that "substantially more funding is likely."

Separately, investment bank Goldman Sachs lowered its forecast for U.S. economic growth Wednesday for the rest of 2005 but raised 2006 estimates, based on the storm's impact.

Goldman said it already believed its prior projection of 5 percent GDP growth for the third quarter of 2005 was too strong. The bank lowered it's third-quarter projection to 3.5 percent and it's fourth quarter projection to 2.5 percent from 3.5 percent earlier.

But the New York-based investment bank boosted its forecast for GDP growth next year to 3.75 percent from 3 percent.

Goldman also said the Federal Reserve may pause in its interest rate hikes to let the economy recover from the effects of Katrina.

But Goldman believes the Fed will resume its "measured" rate hikes at its Nov. 1 meeting before finally stopping at 5 percent, a level unchanged from Goldman previous predictions. The central bank's policy-makers have three meetings scheduled through year-end: Sept. 20, Nov. 1 and Dec. 13.